NAFTA – Mexico Gaining or Canada Losing (US is Winning)

Last week we heard a lot of reports on NAFTA renegotiations and a probability of proceeding without Canada emerged. The reports highlighted that the US and Mexico might have struck a tentative deal and Canada is asked to make a decision in next 7 days about its reservations.

NAFTA talks are heating up now. The US is now moving faster and showing muscle power (ongoing policy of current administration). May be composition of the US Congress is about to change and Republicans might be losing a lot, so they are moving as fast as they can.

Interestingly, the deal signed by Mexico with the US does not include the elimination of recent steel and aluminum tariffs. So, I was under impression that those tariffs were one of major reasons that Canada and Mexico were sitting with the US on the discussion table. Well, I was wrong or maybe not.

I am hoping that if NAFTA lives than Canada and Mexico will not have to pay the steel and aluminum tariffs.

Worryingly, Canada is on the back-foot and Mexico has suddenly gained ground on the deal. However it would be really a strange situation if Canada is not a part of NAFTA and the US signs the final deal with Mexico.

RBC Global Asset Management has done a fair analysis of current situation and assigned probability scores to outcome of the negotiation:

NAFTA

 

More at http://www.rbcgam.com/investment-insights/macromemo/index.html

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